Tax structure on fuel needs reforming: Nida

Erich Parpart
The Nation March 21, 2014 1:00 am

Move necessary to reflect actual costs

Fuel taxes on production and distribution need to be reformed because the tax burden for each type of fuel is disproportionate, while not reflecting actual production costs, according to the National Institute of Development Administration.

Nattapong Thongpakde, director of the Centre for the Study of Sufficiency Economy at Nida, said the claims that have been circulating on social media that fuel in Thailand is among the most expensive in the world, the Kingdom is oil-rich and a single company enjoys a monopoly and makes prices artificially high were all myths.

Prices below world average

"Fuel in Thailand is not among the most expensive in the world," he said. "There are many countries that are paying more than us and most of the fuel prices in each category here are below the world average."

According to Nida's research team, Thais pay well below global average prices for diesel, ranked at 76th out of 86 countries, and for unleaded gasohol, for which Thailand is 57th.

People in Europe, South Korea and the United States pay much more for diesel at an average of Bt50 per litre while Thais only have to pay Bt29.99.

Thiraphong Vikitset, a member of Nida's council and professor at the School of Development Economics, said the reason Thais seemed to be paying more for petrol than their neighbours, especially in Malaysia, was the tax rates, which push the real pump price much higher than cost.

Gasohol retails in Thailand for Bt45.75 per litre but the actual cost - Bt23.79 refinery cost plus Bt1.31 marketing margin - is only Bt25.10, which means that Bt20.65 of the pump price is actually taxes.

In Malaysia, the retail price for gasohol is Bt18.63 and the actual cost is similar at Bt23.92, which mean that the Malaysian government is actually subsidising its people by Bt5.29 a litre.

"The Malaysians have taken a different approach than us. The Thai government's policy has put a heavy tax burden on fuel but the Malaysians are providing support for it," Thiraphong said.

"Thailand's fuel is more expensive than in Malaysia because of government policy, not because of monopolisation by an oil company," he added.

Nattapong pointed out that if pump prices seemed high here it was not because of a lack of competition, since there are many more distributors and manufacturers now besides PTT, Bangchak Petroleum, Shell and Esso, which dominated the market 20 years ago.

Thailand is also not oil-rich. The country is a net importer of crude oil, not a net exporter.

It only exports 20 per cent of its oil products, and these are mostly excess that the country does not require for its own use.

"We import many types of fuel and some of this that we do not use … is surplus, which we try to phase out through exporting," he said.

There should be structural reform to lower the tax burden and adjust marketing margins so that they are similar for each type of fuel, Nattapong said.

The government should provide information on what it is using the revenue from the heavy tax burden on fuel for and if it is going to continue with the same structure.

Marketing margin

"Why do people who use [pure] petrol have to pay more for the marketing margin than people who use E85 [gasohol that is 85 per cent ethanol] when the actual cost is the almost the same?

Especially when people who mostly use petrol are motorcycle drivers and people who use E85 are Mercedes drivers," he added.